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The regulatory radar: Navigating the evolving insurance sector landscape in 2024

10 July 2024

The insurance industry continues to contend with ongoing regulatory challenges from myriad political and macroeconomic factors. These drivers create a dynamic and ever-changing regulatory landscape, requiring insurance companies to stay agile and adaptable to safeguard ongoing compliance.

2024 sees the insurance sector face a complex and dynamic regulatory environment. A recent presentation by Andrew Jacobs, Partner and Head of Regulatory Consulting at DWF, to attendees at the DWF InsureInsight event in London provided a comprehensive overview of key regulatory initiatives, emerging trends and focus areas for the year ahead.

Regulatory initiatives in 2024 

The updated Regulatory Initiatives Grid, originally due for release in May, has been delayed due to the General Election, so the immediate focus remains on the update from November 2023, which highlights several cross-cutting themes and critical initiatives for 2024 and beyond.

These include a spotlight on competition and innovation, conduct, Consumer Duty, ESG, and financial and operational resilience. Specific areas of attention include sustainability disclosures, complaints reporting improvements, debt advice rules review, and reforms to Solvency II.

Regulatory perimeter activity focuses on bringing greater clarity and scope to existing rules while enhancing regulation to expand consumer protection and ensure positive outcomes. This emphasis aims to provide a more comprehensive and transparent regulatory framework that ultimately benefits consumers and promotes a fair and competitive marketplace.

  • Advice Guidance Boundary Review: the aim is to close the ‘advice gap’ further and clarify the distinction between advice and personal recommendations.
  • Buy Now Pay Later (BNPL): the delay to implementing draft legislation continues, with an interim regulatory focus on unfair contract terms and financial promotions.
  • Financial Promotions: the Financial Promotions Gateway outlines the permissions needed for financial promotion approval, including a new direction for communications on social media.
  • Motor Finance Commission Review: the FCA will conduct an ongoing review of historical DCAs and extend the opportunity for Financial Ombudsman Service (FOS) involvement to ensure fair treatment for consumers.
  • Retirement Income Thematic Review: continued evaluation of whether consumers receive appropriate advice following pension freedom reforms.

Focus on conduct

The implementation of guidance on fair treatment of vulnerable customers (FG21/1) is under review, with a focus on critical areas, including considering vulnerability at every stage of the customer journey, engaging staff training, granular data capture to measure outcomes for vulnerable customers, and addressing financial non-sophistication in online-only channels. Review findings are expected by the end of 2024.

Accelerating the pace of change in Diversity and Inclusion (D&I) within the financial sector remains a priority, with DP21/2 outlining proposals to compel firms to embed D&I into their governance, strategy, and reporting.

Non-financial misconduct also remains high on the agenda, with the Treasury Select Committee's report on ‘Sexism in the City’ emphasising the need for greater responsibility from Boards and senior leadership in addressing this issue while also highlighting the regulator's role. In response, the FCA issued a Notice to Provide Information (s165) to Lloyd's Managing Agents and London Market Insurers seeking data on non-financial misconduct (NFM) incidents.

Building resilience

Operational Resilience regulations for financial firms, as mandated by the FCA and PRA, emphasise the need for firms to continually evolve their systems and controls in response to technological developments, cyber security threats, and changing consumer expectations. 

The regulators expect Boards and senior management to actively oversee operational resilience programs, focusing on identifying essential business services, setting impact tolerances, and conducting lessons-learned exercises. The goal is to ensure firms can maintain critical services and minimise disruptions that could harm clients or pose risks to the financial system. The deadline for compliance is 31 March 2025.

AI and technology

The Bletchley Declaration, signed at the UK's AI Safety Summit in 2023, aims to promote collaboration and research to accelerate action on the safe and responsible development of frontier AI worldwide. The declaration underlines that AI must be developed in a safe, human-centric and responsible manner, and it stresses the need to understand and address advanced AI risks promptly.

Furthermore, recent FCA and Bank of England updates on their approaches to AI require that regulated firms clearly explain their use of AI and develop a compelling narrative on managing the associated risks.

FCA Business Plan 2024/2025

The FCA's Business Plan 2024/2025 outlines its strategic focus areas as reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change. Additionally, the Plan details focus areas for the year ahead and specific commitments, including preventing financial crime, enhancing Consumer Duty, and advancing ESG priorities.

A new approach to enforcement

The FCA's Consultation Paper CP24/2 proposes significant changes to publicising enforcement investigations to increase transparency and deter misconduct. The proposed approach includes a relaxed public interest framework test applied on a case-by-case basis, focusing on protecting the UK financial system's integrity, reassuring the public, assisting investigations, and safeguarding affected customers' interests while maintaining privacy protections.

Consumer Duty

The FCA has published its findings on the Consumer Duty implementation since July 2023, aiming to remind firms of required consumer outcomes, showcase good practices, and emphasise areas for improvement. 

Rules mandate a Governing Body report detailing monitoring results and required actions. The governing body must review customer outcomes, confirm compliance with Principle 12 and PRIN 2A, assess business strategy alignment, and agree on actions to address risks and poor outcomes.

By 31 July 2024, firms must evaluate all closed products and services against every aspect of the Consumer Duty, and the governing bodies are responsible for ensuring that their firms are adequately prepared for implementation.

Looking ahead 

The session finished with a look at what firms should prioritise in 2024. Horizon scanning will be crucial throughout the year, particularly given the potential for regulatory changes in an election year. A clear focus should remain on conduct, operations, and governance and oversight, with Consumer Duty as an overarching consideration.

Firms must stay vigilant and adaptive in this evolving regulatory landscape. By focusing on critical areas such as consumer protection, operational resilience, and responsible innovation, firms can navigate the challenges and leverage the opportunities the current environment presents.

The expert guidance provided by DWF's Regulatory Consulting services helps clients navigate the dynamic and challenging regulations within the UK insurance sector. By leveraging its deep regulatory expertise, DWF delivers strategic advice and practical solutions that ensure compliance and utilise regulations to build a competitive advantage.

For more information, contact Andrew Jacobs, Partner & Head of Regulatory Consulting at DWF.

Further Reading